Approved by the Board: September 23, 2008
LANSING BOARD OF WATER AND LIGHT
_________________________
Tuesday, August 12, 2008
_________________________
The Board of Commissioners met at the Executive Offices of 1232 Haco Drive, Lansing, Michigan.
Present: Commissioners Robert Cochran, Tony DeLuca, Semone James, Peter Kramer, Frank Lain, Julee Rodocker, Tracy Thomas and Sandra Zerkle.
Absent: None
The Secretary declared a quorum present.
Chairperson James Lain called the meeting to order at
5:30 p.m.
THE CHAIR ANNOUNCED THAT MEMBERS OF THE PUBLIC ARE WELCOME TO SPEAK TO THE BOARD ON ANY AGENDA SUBJECT AND ANYONE WISHING TO COMMENT ON ANY MATTER NOT ON THE AGENDA MAY DO SO IMMEDIATELY PRIOR TO ADJOURNMENT.
There were no public comments.
Letter from Ron Byrnes, IBEW Local 352 Business Manager and Jim Dravenstatt-Moceri, Assistant Business Manager regarding same day service.
The letter was read into the record and received and placed on file.
Commissioner Cochran expressed concern over new policies not brought before the Board of Commissioners in light of current customer relations. He requested that the Board be involved in the decision-making process prior to implementation.
Commissioner James echoed Commissioner Cochran’s sentiments and inquired why, given the effect upon ratepayers, the Board was not involved. Commissioner James requested that implementation of the new change not take place as presented.
General Manager J. Peter Lark clarified that the change was operational in nature and within management’s judgment. He further highlighted the change improves efficiency and safety, reduces overtime, and saves approximately $70,000 a year. Because the Board of Water and Light (BWL) does not turn-off service for non-payment on Friday’s, customers have a full business day to make payment and have service restored the same day when possible. Mr. Lark advised that the change was not scheduled to take place as of yet. Therefore, while he thought this to be good policy, he was confident there was time to amicably resolve any particular issues in order to ensure the BWL realizes savings while providing utmost customer service. Lark also advised that he intended to have continued discussion with union representatives.
In response to Commissioner inquiries, Mr. Lark highlighted that all customers are affected by the policy. Making decisions that benefit most customers while saving money requires the balancing of interests. Mr. Lark advised that he would make a better effort in understanding those matters that affect the Board. In addition, Mr. Lark confirmed that the policy would not go into effect at this time.
Commissioner Lain asked that when the General Manager deems necessary, the Board of Commissioners should receive 48-hours notice prior to implementing changes that affect the end-user. It was also agreed that this matter would be referred to the Committee of the Whole for further discussion if necessary.
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A. |
Revised Defined Benefit Plan Investment Policy Statement |
Whereas, the Board has engaged Merrill Lynch Institutional Consulting Group to provide consulting advisory services to the Defined Benefit Plan for Employees’ Pension regarding Investment Policy Statement review; Strategic Asset Allocation Modeling; Investment Manager due diligence, search, and selection; Portfolio Strategy and Performance Measurement; and
Whereas, on July 15, 2008 Merrill Lynch Institutional Consulting Group updated the Finance Committee on the results of its Asset Allocation Study for the Defined Benefit Plan that was completed utilizing its Strategic Allocation Modeling technique to determine a long range asset mix that represents an appropriate blend of risk and return; and
Whereas, the Trustees of Lansing Board of Water and Light Defined Benefit Plan for Employees’ Pension, consisting of all members of the Board of Commissioners, desire to revise the asset allocation mix for the investments in the Trust Fund; and
Whereas, the Board of Commissioners desire to update the Investment Policy Statement for the Lansing Board of Water and Light Defined Benefit Plan for Employees’ Pension consistent with recommendations provided by Merrill Lynch Institutional Consulting Group.
RESOLVED, That the Board of Commissioners amend the resolution dated March 27, 2007, adopting policy changes to the Defined Benefit Investment Policy; and
FURTHER RESOLVED, that the Board of Commissioners hereby approve the amended Investment Policy Statement for Lansing Board of Water and Light Defined Benefit Plan for Employees’ Pension dated July 2008, as attached.
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Motion by Commissioner Cochran, seconded by Commissioner James to approve the resolution for the Revised Defined Benefit Plan Investment Policy Statement.
Action: Carried unanimously.
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B. |
Revised Post-Employment Benefit Plan (VEBA Trust) Investment Policy Statement |
Whereas, the Board has engaged Merrill Lynch Institutional Consulting Group to provide consulting advisory services to the Post-Employment Benefit Plan (VEBA) regarding Investment Policy Statement review; Strategic Asset Allocation Modeling; Investment Manager due diligence, search, and selection; Portfolio Strategy and Performance Measurement; and
Whereas, on July 15, 2008 Merrill Lynch Institutional Consulting Group updated the Finance Committee on the results of its Asset Allocation Study for the Post-Employment Benefit Plan (VEBA) that was completed utilizing its Strategic Allocation Modeling technique to determine a long range asset mix that represents an appropriate blend of risk and return; and
Whereas, the Trustees of Lansing Board of Water and Light Post-Employment Benefit Plan (VEBA), consisting of all members of the Board of Commissioners, desire to revise the asset allocation mix for the investments in the Trust Fund; and
Whereas, the Board of Commissioners desire to update the Investment Policy Statement for the Lansing Board of Water and Light Post-Employment Benefit Plan (VEBA) consistent with recommendations provided by Merrill Lynch Institutional Consulting Group.
RESOLVED, that the Board of Commissioners amend the resolution dated March 27, 2007, adopting policy changes to the VEBA Trust Investment Policy; and
FURTHER RESOLVED, that the Board of Commissioners hereby approve the amended Investment Policy Statement for Lansing Board of Water and Light Post-Employment Benefit Plan (VEBA) dated July 2008, as attached.
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Motion by Commissioner Cochran, seconded by Commissioner James to approve the resolution for the Revised Post-Employment Benefit Plan (VEBA Trust) Investment Policy Statement.
Action: Carried unanimously.
C. Sale of Refunding 1999B Bonds
RESOLUTION AUTHORIZING SALE OF REFUNDING BONDS
UNDER FOURTH SUPPLEMENTAL REVENUE BOND RESOLUTION
A RESOLUTION TO:
· Refund the Subordinate Lien Revenue Bonds, Series 1999B (Federally Taxable) through issuance of up to $60,000,000 of Subordinate Lien Revenue Refunding Bonds (Federally Taxable);
· Create and Fund the Series 2008B Junior Lien Bond Reserve Account;
· Reduce future Rate Covenant to 125% of debt service;
· Refunding Bonds to be sold by Negotiated Sale;
· Chief Financial Officer to Select Underwriters of Bonds;
· Chief Financial Officer to sell Bonds within parameters of this resolution; and
· Other matters relative to issuance, sale and delivery of Bonds.
WHEREAS, the City of Lansing acting by and through the Lansing Board of Water and Light has previously issued its revenue bonds payable from revenues of the Water Supply, Steam, Chilled Water and Electric Utility System under the provisions of Act 94, Public Acts of Michigan, 1933, as amended, and a Bond Resolution amended and restated on October 24, 1989 and further amended and supplemented as described under the definition “Bond Resolution” below; and
WHEREAS, under the terms of the Fourth Supplemental Revenue Bond Resolution adopted October 26, 1999 and a Sales Resolution adopted by the Board on November 30, 1999, the Board has heretofore issued and sold Water Supply, Steam and Electric Utility System Subordinate Lien Revenue Bonds, Series 1999B (Federally Taxable) (the “Series 1999B Bonds”) in the aggregate principal sum of $78,455,000 for the purpose of financing the construction and equipping of a central utilities complex to provide hot water, chilled water, deionized water, compressed air and wastewater treatment, among other utility services (the “Series 1999B Project”); and
WHEREAS, the Board’s Financial Advisor, Robert W. Baird & Co. has advised the Board that it may be able to accomplish a net savings of debt service costs, and thereby reduce the cost to the Board of the Series 1999B Project, by refunding all or a portion of the outstanding Series 1999B Bonds through the issuance of revenue refunding Bonds in an aggregate principal amount of not-to-exceed $60,000,000 (the “Series 2008B Bonds”); and
WHEREAS, Section 20(b) of the Fourth Supplemental Revenue Bond Resolution authorizes the issuance of Additional Junior Lien Bonds of equal standing and priority of lien with the outstanding Series 1999B Bonds for the purposes of refunding a part of the Series 1999B Bonds and paying costs of issuance if, after giving effect to the refunding, the maximum amount of Aggregate Debt Service in each future fiscal year shall be less than the Aggregate Debt Service in each future fiscal year prior to giving effect to the refunding; and
WHEREAS, in order to take advantage of the most favorable market for sale of the Series 2008B Bonds and purchase of securities to be escrowed for payment of the Series 1999B Bonds to be refunded, the Board wishes to authorize the Chief Financial Officer to sell the Series 2008B Bonds at negotiated sale without further resolution of the Board.
NOW, THEREFORE, BE IT RESOLVED THAT:
Section 1. Supplemental Resolution. The Fourth Supplemental Revenue Bond Resolution is hereby amended and supplemented by this Resolution Authorizing Sale of Refunding Bonds in accordance with Section 20(b) of the Fourth Supplemental Revenue Bond Resolution and Section 23(a)(i) of the amended and restated Bond Resolution.
Section 2. Definitions. All terms not defined herein shall have the meanings set forth in the Bond Resolution, and whenever used in this Bond Resolution, except when otherwise indicated by the context, the following terms shall have the following meanings:
(a) “Additional Junior Lien Bonds” means Additional Junior Lien Bonds issued pursuant to Section 20 of the Fourth Supplemental Revenue Bond Resolution and Section 11 of this Resolution of equal standing and priority of lien with the Series 1999B Bonds and the Series 2008B Bonds.
(b) “Bond Resolution” means the Bond Resolution adopted by the Board on September 26, 1989, as amended and restated on October 24, 1989 and supplemented by the First Supplemental Revenue Bond Resolution adopted by the Board on October 26, 1993, the Second Supplemental Revenue Bond Resolution adopted by the Board on January 11, 1994, the Third Supplemental Revenue Bond Resolution adopted on September 2, 1999, the Fourth Supplemental Revenue Bond Resolution adopted October 26, 1999, the Series 1999B Sales Resolution adopted by the Board on November 30 1999, the Fifth Supplemental Bond Resolution adopted by the Board on April 24, 2001, the Sixth Supplemental Revenue Bond Resolution adopted by the Board on July 23, 2002, the Seventh Supplemental Bond Resolution adopted by the Board on July 23, 2002, the Eighth Supplemental Revenue Bond Resolution adopted on August 12, 2003, the Ninth Supplemental Revenue Bond Resolution adopted on July 26, 2005, the Tenth Supplemental Revenue Bond Resolution adopted on January 29, 2008, and this Resolution Authorizing Sale of Refunding Bonds, and any other resolution which amends or supplements the Bond Resolution.
(c) “Chief Financial Officer” means the Chief Financial Officer of the Board.
(d) “Junior Lien Bond and Interest Redemption Fund” means the Junior Lien Bond and Interest Redemption Fund established under Section 11C of the amended and restated Bond Resolution and Section 5 of the Fourth Supplemental Revenue Bond Resolution.
(e) “Junior Lien Bond Reserve Requirement” means the Reserve Requirement determined to be necessary to sell the Series 2008B Bonds in consultation with the Board’s Financial Advisor as provided in Section 7 of this Resolution.
(f) “Junior Lien Bonds” means the Series 1999B Bonds, the Series 2008B Bonds, and any Additional Junior Lien Bonds of equal standing hereafter issued as permitted by Section 20(b) of the Fourth Supplemental Revenue Bond Resolution and Section 11 of this Resolution.
(g) “Senior Lien Bonds” means the Water Supply, Steam and Electric Utility System Revenue Bonds, Series 1999A, the Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2002A, the Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2002B, the Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2003A, and the Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2005A, and the Water Supply, Steam, Chilled Water and Electric Utility System Revenue Bonds, Series 2008A and any Additional Bonds hereafter issued of equal standing to the Senior Lien Bonds.
(h) “Series 1999B Bonds” means the Water Supply, Steam and Electric Utility System Subordinate Lien Revenue Bonds, Series 1999B (Federally Taxable) being refunded pursuant to this Resolution.
(i) “Series 1999B Escrow Agreement” means the Series 1999B Escrow Agreement described in this Resolution to provide for payment of principal of and interest on the Series 1999B Bonds.
(j) “Series 1999B Escrow Fund” means the Series 1999B Escrow Fund established pursuant to the Series 1999B Escrow Agreement to hold the cash and investments necessary provide for payment of principal of and interest on the Series 1999B Bonds.
(k) “Series 1999B Project” means the construction and equipping of a central utilities complex to provide hot water, chilled water, deionized water, compressed air and wastewater treatment, among other utility services, financed by the Series 1999B Bonds and re-financed by the Series 2008B Bonds.
(l) “Series 2008B Bonds” means the Water Supply, Steam, Chilled Water and Electric Utility System Subordinate Lien Revenue Refunding Bonds, Series 2008B (Federally Taxable).
(m) “Series 2008B Junior Lien Bond Reserve Account” means the Series 2008B Junior Lien Bond Reserve Account created within the Junior Lien Bond and Interest Redemption Fund under Section 7 of this Resolution.
(n) “System” means the complete facilities of the Board for the supply and distribution of water and the generation and distribution of electricity, steam, chilled water, and heat, including all plants, works, instrumentalities and properties, used or useful in connection with the supply and distribution of water and the generation and distribution of electricity, steam, chilled water, and heat and all additions, extensions and improvements thereto existing or hereafter acquired by the Board.
(o) “Utility Services Agreement” means the Utility Services Agreement as amended by the First Amended and Restated Utility Services Agreement dated August 12, 2004 relating to the Series 1999B Project among Trigen/Cinergy – Solutions USFOS of Lansing, LLC, and the City acting by and through the Board, and General Motors Corporation, Worldwide Facilities Group, Lansing Luxury Assembly Plant.
Section 3. Conditions Permitting Issuance of Additional Bonds. Pursuant to Section 20(b) of the Fourth Supplemental Revenue Bond Resolution, the Board hereby determines that the Series 2008B Bonds shall be issued as Additional Junior Lien Bonds for the purpose of refinancing the Series 1999B Project by refunding all or a portion of the Series 1999B Bonds and paying costs of issuance of the Series 2008B Bonds, only if, after giving effect to the refunding, the maximum amount of Aggregate Debt Service in each future fiscal year shall be less than the Aggregate Debt Service in each future fiscal year prior to giving effect to the refunding.
Section 4. Refunding of Series 1999B Bonds; Series 2008B Bonds Authorized; Priority of Lien; Applicable Law. To pay costs of refunding all or a portion of the Series 1999B Bonds, including the payment of the costs of legal, financial, bond insurance (if any), underwriter’s discount and other expenses incident thereto and incident to the issuance and sale of the Series 2008B Bonds, the City, acting by and through the Board, shall borrow the sum of not-to-exceed Sixty Million Dollars ($60,000,000) as finally determined upon the sale thereof, and issue the Series 2008B Bonds therefor. The Series 2008B Bonds shall be payable solely out of the Net Revenues of the System subject in priority only to the statutory lien with respect to the Senior Lien Bonds. The statutory lien on Net Revenues which is hereby established and pledged to secure payment of the Series 2008B Bonds shall be subordinate in priority of lien to the statutory lien on the Net Revenues of the System pledged to pay the principal of and interest on the Senior Lien Bonds. The Series 2008B Bonds shall have equal standing and priority of lien to the statutory lien on the Net Revenues of the System with any portion of the Series 1999B Bonds which are not paid in full or defeased. The Lansing City Council shall not be requested to pledge the full faith and credit of the City for payment of the Series 2008B Bonds. The Series 2008B Bonds shall be sold and the proceeds applied in accordance with the provisions of Act 94.
Section 5. Series 2008B Bond Details, Registration and Execution. The Series 2008B Bonds shall be designated as the “WATER SUPPLY, STEAM, CHILLED WATER AND ELECTRIC UTILITY SYSTEM SUBORDINATE LIEN REVENUE REFUNDING BONDS, SERIES 2008B (FEDERALLY TAXABLE).” The Series 2008B Bonds shall be issued as fully registered bonds registered in the denomination of $5,000 or integral multiples thereof and shall be numbered in consecutive order of registration or authentication from 1 upwards. The Series 2008B Bonds shall be dated as of the Date of Delivery thereof or such other date as determined at the time of sale of the Series 2008B Bonds, shall mature as serial bonds or term bonds on such dates as shall be determined at the time of sale of the Series 2008B Bonds but not-to-exceed eight (8) annual maturities.
The Series 2008B Bonds shall bear interest at a rate or rates to be determined on sale thereof, payable on January 1, 2009, or such other date as provided at the time of sale of the Series 2008B Bonds, and semi-annually thereafter on January 1st and July 1st of each year.
The Series 2008B Bonds shall be subject to optional or mandatory redemption prior to maturity at the times and prices finally determined at the time of sale of the Series 2008B Bonds. The Chief Financial Officer may determine that the Series 2008B Bonds shall not be subject to optional or mandatory redemption prior to maturity.
The Series 2008B Bonds shall be executed by the manual or facsimile signature of the Chairperson and the Corporate Secretary of the Board. No Series 2008B Bond shall be valid until authenticated by an authorized representative of the Transfer Agent. The Series 2008B Bonds shall be delivered to the Transfer Agent for authentication and be delivered by the Transfer Agent to the purchaser in accordance with instructions from the Chief Financial Officer upon payment of the purchase price for the Series 2008B Bonds in accordance with the bid therefor when accepted. Executed blank bonds for registration and issuance to transferees shall be delivered to the Transfer Agent for safekeeping from time to time as necessary.
Section 6. Registration and Transfer. The bank or trust company serving as registrar and Transfer Agent for the Series 1999B Bonds is hereby designated as transfer agent for the Series 2008B Bonds (the “Transfer Agent”). The Chief Financial Officer is hereby authorized to execute one or more agreements with the Transfer Agent on behalf of the Board. The Board reserves the right to replace the Transfer Agent at any time, provided written notice of such replacement is given to the registered owners of record of bonds not less than sixty (60) days prior to an interest payment date. Principal of and interest on the Series 2008B Bonds shall be payable by check or draft mailed by the Transfer Agent to the registered owner at the registered address as shown on the registration books of the Board maintained by the Transfer Agent. Interest shall be payable to the person or entity who or which is the registered owner of record as of the fifteenth (15th) day of the month prior to the payment date for each interest payment. The date of determination of the registered owner for purposes of payment of interest as provided in this paragraph may be changed by the Board to conform to market practice in the future.
The Series 2008B Bonds may be issued in book-entry-only form through The Depository Trust Company in New York, New York (“DTC”), and the Chief Financial Officer is authorized to execute such custodial or other agreement with DTC as may be necessary to accomplish the issuance of the Series 2008B Bonds in book-entry-only form and to make such changes in the form of the Series 2008B Bonds within the parameters of this Resolution as may be required to accomplish the foregoing. Notwithstanding the foregoing, if the Series 2008B Bonds are held in book-entry-only form by DTC, payment of principal of and interest on the Series 2008B Bonds shall be made in the manner prescribed by DTC.
The Series 2008B Bonds may be transferred upon the books required to be kept by the Transfer Agent pursuant to this section by the person or entity in whose name it is registered, in person or by the registered owner’s duly authorized attorney, upon surrender of the bond for cancellation, accompanied by delivery of a duly executed written instrument of transfer in a form approved by the Transfer Agent. Whenever any bond shall be surrendered for transfer, the Board shall execute and the Transfer Agent shall authenticate and deliver a new bond of the same series in like aggregate principal amount, maturity and interest rate. The Transfer Agent shall require the payment by the bondholder requesting the transfer of any tax or other governmental charge required to be paid with respect to the transfer. Notwithstanding the foregoing, if Bonds are held by DTC in book-entry-only form, the transfer of Bonds shall be made in the manner prescribed by DTC.
Upon payment by the Board of all outstanding principal of and interest on the Series 2008B Bonds, the registered owner thereof shall deliver the Series 2008B Bonds to the Board for cancellation.
Section 7. Reserve Requirement Determined; Reserve Account Established and Funded. The Surety Bond issued by MBIA Insurance Corporation, the “Bond Insurer” as defined in the Fourth Supplemental Revenue Bond Resolution, which Surety Bond is on deposit in the Junior Lien Bond Reserve Account established under the Fourth Supplemental Revenue Bond Resolution for the Series 1999B Bonds, does not secure the Series 2008B Bonds.
On or prior to the sale of the Series 2008B Bonds, the Chief Financial Officer shall obtain a recommendation from Robert W. Baird & Co., the Board’s Financial Advisor, regarding the amount which the Board should pledge to maintain as the Junior Lien Bond Reserve Requirement in order to sell the Series 2008B Bonds, and the Chief Financial Officer is hereby authorized to determine the Junior Lien Bond Reserve Requirement for the Series 2008B Bonds based upon the recommendation from the Financial Advisor in an amount not to exceed one-half of the maximum Aggregate Debt Service Requirement of the Junior Lien Bonds.
The Series 2008B Junior Lien Bond Reserve Account is hereby established in the Junior Lien Bond and Interest Redemption Fund as separate account separate from the Junior Lien Bond Reserve Account established under the Fourth Supplemental Revenue Bond Resolution with respect to the Series 1999B Bonds. On or prior to the date of delivery of the Series 2008B Bonds, the Chief Financial Officer shall deposit into the Series 2008B Junior Lien Bond Reserve Account any amount necessary to cause the amount on deposit in the Series 2008B Junior Lien Bond Reserve Account to be equal to the Junior Lien Bond Reserve Requirement for the Series 2008B Bonds. The Board may meet the Junior Lien Bond Reserve Requirement for the Series 2008B Bonds by a letter of credit, a surety bond, or an insurance policy if the provider or issuer thereof shall be rated AAA by Moody’s Investors Service and Standard and Poor’s Corporation or any successor to either. Except as hereinafter provided, the moneys credited to the Series 2008B Junior Lien Bond Reserve Account shall be used solely for the payment of the principal of, redemption premiums (if any) and interest on the Series 2008B Bonds as to which there would otherwise be a default. If at any time it shall be necessary to use moneys credited to the Series 2008B Junior Lien Bond Reserve Account for such payment, then the moneys so used shall be replaced from the Net Revenues first received thereafter which are not required for expenses of administration, operation and maintenance of the System, for current principal and interest requirements of any Bonds issued under the Bond Resolution, or for deposit to the Bond Reserve Account securing the Senior Lien Bonds. At any time that the amount of the Series 2008B Junior Lien Bond Reserve Account is in excess of the Junior Lien Bond Reserve Requirement for the Series 2008B Bonds, whether as a result of investment earnings or any other reason, such excess shall be deemed to be surplus moneys and may be transferred to such fund or account as the Board shall direct. Upon payment or defeasance in full of the Series 2008B Bonds the amount in deposit in the Series 2008B Junior Lien Bond Reserve Account shall be deemed to be surplus moneys and may be transferred to such fund or account as the Board shall direct.
Section 8. Series 2008B Bond Proceeds. From the proceeds of sale of the Series 2008B Bonds there first shall be immediately deposited in the Junior Lien Bond and Interest Redemption Fund an amount equal to the accrued interest and premium, if any, received on delivery of the Series 2008B Bonds, and the Board may take credit for the amount so deposited against the amount required to be deposited in the Junior Lien Bond and Interest Redemption Fund for payment of the next maturing interest on the Series 2008B Bonds; provided, however, that at the discretion of the Chief Financial Officer, all or a portion of any premium received upon delivery of the Series 2008B Bonds may be deposited in the Bond Reserve Account or the Series 1999B Escrow Fund in consultation with Bond Counsel.
There shall next be deposited in the Series 2008B Junior Lien Bond Reserve Account an amount, if any, designated by the Chief Financial Officer at the time of sale of the Series 2008B Bonds as necessary to cause the amount on deposit in the Series 2008B Junior Lien Bond Reserve Account to be equal to the Junior Lien Bond Reserve Requirement for the Series 2008B Bonds.
There shall next be deposited in the Series 1999B Escrow Fund cash and investments in direct obligations of or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America, not redeemable at the option of the issuer, and in an amount sufficient to pay principal and interest on the Series 1999B Bonds being refunded. The Series 1999B Escrow Fund shall be held by the Escrow Agent (defined below) in trust pursuant to the Series 1999B Escrow Agreement which shall irrevocably direct the Escrow Agent to take all necessary steps to call the Series 1999B Bonds being refunded for redemption as specified in the Series 1999B Escrow Agreement. The cash and investments and income received thereon held in the Series 1999B Escrow Fund will be sufficient without reinvestment to pay the principal and interest on the Series 1999B Bonds upon call for redemption as required by this section. The bank or trust company serving as registrar and Transfer Agent for the Series 1999B Bonds is hereby designated as Escrow Agent under the Series 1999B Escrow Agreement.
Either the Chief Financial Officer or the Manager of Finance and Planning is hereby authorized to execute and deliver the Series 1999B Escrow Agreement and to purchase, or cause to be purchased, escrow securities in an amount sufficient to fund the Series 1999B Escrow Fund.
The remaining proceeds of the Series 2008B Bonds shall be deposited in a fund which may be established in the Series 1999B Escrow Agreement to pay costs of issuance of the Series 2008B Bonds and the costs of refunding the Series 1999B Bonds.
Section 9. Rate Covenant. After payment or defeasance in full of the Series 1999B Bonds, the Board will at all times fix, establish, maintain and collect rates, fees and charges for the sale of the output, capacity, use or service of the System which, together with other income, are reasonably expected to yield Net Revenues equal to at least 125% of the Aggregate Debt Service Requirement for the forthcoming twelve month period plus such amount as is necessary to comply with all covenants in the Bond Resolution and to pay all charges and liens whatsoever payable out of Net Revenues in such period. The Rate Covenant applicable to the Outstanding Senior Lien Bonds shall remain in effect as provided in the resolution authorizing the Outstanding Senior Lien Bonds.
Section 10. Series 2008B Bond Form. The Series 2008B Bonds shall be in substantially the following form with such revisions, additions and deletions as the Board may deem advisable or necessary to comply with the final terms of the Series 2008B Bonds established upon sale thereof:
Bond No.
R-__
United States of America
State of Michigan
Counties of Ingham and Eaton
CITY OF LANSING
LANSING BOARD OF WATER AND LIGHT
WATER SUPPLY, STEAM, CHILLED WATER AND ELECTRIC UTILITY
SYSTEM SUBORDINATE LIEN REVENUE REFUNDING BONDS, SERIES 2008B
(FEDERALLY TAXABLE)
|
Interest Rate |
Date of Maturity |
Date of Original Issue |
CUSIP |
|
__________% |
July 1, 20___ |
__________, 2008 |
___________ |
|
Registered Owner: |
Cede & Co. |
||
|
Principal Amount: |
________________ ($____________) Dollars |
||
The City of Lansing, Counties of Ingham and Eaton, State of Michigan (the “City”), acting by and through the Lansing Board of Water and Light (the “Board”), acknowledges itself to owe and for value received hereby promises to pay to the Registered Owner specified above, or registered assigns, only from the Net Revenues of the System as hereinafter provided, the Principal Amount specified above, in lawful money of the United States of America, on the Date of Maturity specified above, unless prepaid prior thereto as hereinafter provided, with interest thereon (computed on the basis of a 360-day year of twelve 30-day months) from the Date of Original Issue specified above or such later date to which interest has been paid, until paid, at the Interest Rate per annum specified above, first payable on _______ 1, 2009 and semiannually thereafter. Principal of this bond is payable at the designated corporate trust office of _________________, ______, ________, or such other transfer agent as the Board may hereafter designate by notice mailed to the registered owner of record not less than sixty (60) days prior to any interest payment date (the “Transfer Agent”). Interest on this bond is payable by check or draft mailed by the Transfer Agent to the person or entity who or which is as of the fifteenth (15th) day of the month prior to each interest payment date, the registered owner of record at the registered address. For the prompt payment of principal and interest on this bond, the revenues received by the Board from the operations of the water supply and electric utility systems including the steam, steam heat and chilled water distribution systems (the “System”) after provision has been made for reasonable and necessary expenses of operation, maintenance and administration of the System (the “Net Revenues”), are irrevocably pledged and a statutory lien thereon has been created to secure the payment of the principal of and interest on this Bond when due subject only to the lien in favor of the Water Supply, Steam and Electric Utility System Revenue Bonds, Series 1999A, Water Supply, Steam and Electric Utility System Revenue Bonds, Series 2002A, Water Supply, Steam and Electric Utility System Revenue Refunding Bonds, Series 2002B, Water Supply, Steam and Electric Utility System Revenue Refunding Bonds, Series 2003A, Water Supply, Steam and Electric Utility System Revenue Refunding Bonds, Series 2005A, and Water Supply, Steam, Chilled Water and Electric Utility System Revenue Bonds, Series 2008A. This bond and the series of which it is one are of equal standing and priority of lien as to the Net Revenues with the outstanding portion of the Water Supply, Steam and Electric Utility System Subordinate Lien Revenue Bonds, Series 1999B (Federally Taxable) and additional junior lien bonds which might be issued in the future pursuant to the Bond Resolution (defined below).
This Bond is one of a series of bonds of like tenor, except as to denomination, rate of interest and date of maturity, aggregating the principal sum of $_______, issued pursuant to a Bond Resolution adopted by the Board on October 24, 1989, as amended and supplemented from time to time, including by the Fourth Supplemental Revenue Bond Resolution adopted by the Board on October 26, 1999, as amended by the Sales Resolution adopted by the Board on November 30 1999 and the a resolution authorizing sale of refunding bonds adopted by the Board on _____________, 2008 (collectively, the “Bond Resolution”), and under and in full compliance with the Constitution and statutes of the State of Michigan, including specifically Act 94, Public Acts of Michigan, 1933, as amended (“Act 94”), for the purpose of refunding certain outstanding subordinate lien revenue bonds which had been issued to construct and equip a central utilities complex to provide hot water, chilled water, deionized water, compressed air and wastewater treatment, among other utility services, [making a deposit to a bond reserve account] and paying the costs of issuing the bonds.
For a complete statement of the revenues from which and the conditions under which this bond is payable, a statement of the conditions under which additional bonds of equal standing as to the Net Revenues may hereafter be issued, and the general covenants and provisions pursuant to which this bond is issued, reference is made to the Bond Resolution. Reference is hereby made to the Bond Resolution and any and all supplements thereto and modifications and amendments thereof, if any, and to Act 94, for a more complete description of the pledges and covenants securing the bonds of this issue, the nature, extent and manner of enforcement of such pledges, the rights and remedies of the registered owners of the bonds of this issue with respect thereto and the terms and conditions upon which the bonds of this issue are issued and may be issued thereunder. To the extent and in the manner permitted by the terms of the Bond Resolution, the provisions of the Bond Resolution or any resolution or agreement amendatory thereof or supplemental thereto, may be modified or amended by the Board, except in specified cases, only with the written consent of the registered owners of at least fifty-one percent (51%) of the principal amount of the bonds of the System then outstanding.
Bonds of this issue are not subject to redemption prior to maturity.
[Standard provisions for optional or mandatory redemption to be inserted if applicable.]
This bond is transferable only upon the books of the Board kept for that purpose at the office of the Transfer Agent by the registered owner hereof in person, or by the registered owner’s attorney duly authorized in writing, upon the surrender of this bond together with a written instrument of transfer satisfactory to the Transfer Agent duly authorized in writing and thereupon a new registered bond or bonds in the same aggregate principal amount and of the same maturity shall be issued to the transferee in exchange therefore as provided in the Bond Resolution, and upon the payment of the charges, if any, therein prescribed. [If bonds can be called prior to maturity, then provision to be inserted stating that bonds to be redeemed are not required to be exchanged beginning 15 days before mailing redemption notice, except the unredeemed portion of bonds being redeemed in part.]
THIS BOND IS A SELF-LIQUIDATING BOND AND IS NOT A GENERAL OBLIGATION OF THE CITY AND DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE CITY WITHIN ANY CONSTITUTIONAL, STATUTORY OR CHARTER LIMITATION, AND IS PAYABLE BOTH AS TO PRINCIPAL AND INTEREST SOLELY FROM THE NET REVENUES OF THE SYSTEM AND CERTAIN FUNDS AND ACCOUNTS ESTABLISHED UNDER THE BOND RESOLUTION. THE PRINCIPAL OF AND INTEREST ON THIS BOND ARE SECURED BY THE STATUTORY LIEN HEREINBEFORE DESCRIBED.
The Board has covenanted and agreed, and covenants and agrees, to fix and maintain at all times while any bonds payable from the Net Revenues of the System shall be outstanding, such rates for service furnished by the System as shall be sufficient to provide for payment of the principal of and interest on the bonds of this issue and any other bonds payable from the Net Revenues as and when the same shall become due and payable, to provide for the payment of expenses of administration and operation and such expenses for maintenance of the System as are necessary to preserve the same in good repair and working order, and to provide for such other expenditures and funds for the System as are required by the Bond Resolution.
It is hereby certified and recited that all acts, conditions and things required by law to be done precedent to and in the issuance of this bond and the series of bonds of which this is one have been done and performed in regular and due time and form as required by law.
This bond is not valid or obligatory for any purpose until the Transfer Agent’s Certificate of Authentication on this bond has been executed by the Transfer Agent.
IN WITNESS WHEREOF, the City, acting by and through the Board, has caused this bond to be signed in the name of the City with the facsimile signatures of the Chairperson and Corporate Secretary of the Board, and a facsimile of the City’s corporate seal to be printed hereon, all as of the Date of Original Issue.
CITY OF LANSING by and through the
LANSING BOARD OF WATER AND LIGHT
By [ Signature of Chairperson to Appear ]
Chairperson
Countersigned:
By [ Signature
of Corporate Secretary to Appear ]
Corporate Secretary
[INSERT
STANDARD FORMS OF CERTIFICATE
OF AUTHENTICATION AND ASSIGNMENT]
Section 11. Additional Junior Lien Bonds. The reference to the Series 1999B Bonds Aggregate Debt Service Requirement contained in Section 20(a) of the Fourth Supplemental Revenue Bond Resolution shall refer to the Aggregate Debt Service Requirement for all Outstanding Junior Lien Bonds issued as permitted under Section 20 of the Fourth Supplemental Revenue Bond Resolution and this Section 11, and the Additional Junior Lien Bonds then being issued.
After payment or defeasance in full of the Series 1999B Bonds, Section 20(b) of the Fourth Supplemental Revenue Bond Resolution is amended to provide as follows:
(b) For refunding all of the Outstanding Junior Lien Bonds and paying costs of issuing such Additional Junior Lien Bonds.
Section 12. Bond Counsel. The Board recognizes that Miller, Canfield, Paddock and Stone, P.L.C. (“Miller Canfield”), has represented from time to time, and currently represents, various underwriters, financial institutions, and other potential participants in the bond financing process for unrelated projects, any of which might offer to purchase the Series 2008B Bonds or provide services related to issuance and sale of the Series 2008B Bonds. The Board hereby requests that Miller Canfield continue to serve the Board as bond counsel for the Series 2008B Bonds, notwithstanding the potential concurrent representation of any such participant in the bond financing process regarding any unrelated matter.
Section 13. Financial Advisor. The Board hereby requests that Robert W. Baird & Co. continue to serve the Board as Financial Advisor for the Series 2008B Bonds.
Section 14. Negotiated Sale. The Board hereby determines to sell the Series 2008B Bonds at a negotiated sale instead of a competitive sale for the reason that a negotiated sale will permit the Board to enter the market on short notice at a point in time which appears to be most advantageous, and thereby possibly obtain a lower rate of interest on the Series 2008B Bonds, and in order to take advantage of the most favorable market for purchase of securities to be escrowed for payment of the Series 1999B Bonds to be refunded. The Chief Financial Officer is authorized to select one or more underwriters, in consultation with the Financial Advisor, and to negotiate a Bond Purchase Agreement with the underwriters. This authorization includes, but is not limited to, designation of the portion of the Series 1999B Bonds to be refunded and called for redemption prior to maturity; determination of original principal amount of the Series 2008B Bonds; the prices at which the Series 2008B Bonds are sold; the date of the Series 2008B Bonds; the schedule of principal maturities and whether the Series 1999B Bonds shall mature serially or as term bonds; provisions for early redemption including mandatory redemption of term bonds, if any; the interest rates and payment dates of the Series 2008B Bonds; application of the proceeds of the Series 2008B Bonds; transfer of balances, if any, from the Junior Lien Bond and Interest Redemption Fund to the Series 1999B Escrow Fund; and purchase of securities for the Series 1999B Escrow Fund. Approval of the matters delegated to the Chief Financial Officer under this Resolution may be evidenced by execution of the Bond Purchase Agreement or the Official Statement.
The underwriter’s discount for the Series 2008B Bonds shall not be greater than 1.00% of the principal amount of the Series 2008B Bonds, net of original issue discount or premium. The Series 2008B Bonds shall not be issued unless there shall be gross savings after payment of all costs of issuance.
By adoption of this Resolution the Board assumes no obligations or liability to any underwriter for any loss or damage that may result to said underwriter from the adoption of this Resolution, and all costs and expenses incurred by the underwriters in preparing for sale of the Series 2008B Bonds shall be paid from the proceeds of the Series 2008B Bonds, if the Series 2008B Bonds are issued, except as may be otherwise provided in the Bond Purchase Agreement to be signed by the Board at the time of sale of the Series 2008B Bonds.
Section 15. Bond Ratings. The Chief Financial Officer is hereby authorized to apply for bond ratings from such municipal bond rating agencies as she deems appropriate in consultation with the Financial Advisor.
Section 16. Bond Insurance. The Series 2008B Bonds shall not be considered “Insured Bonds” insured by MBIA Insurance Corporation, the “Bond Insurer” as defined in the Fourth Supplemental Revenue Bond Resolution. If the Financial Advisor or the underwriters recommend that the Board consider purchase of municipal bond insurance, then the Chief Financial Officer is hereby authorized to negotiate with insurers regarding acquisition of municipal bond insurance, and, in consultation with the Financial Advisor and the underwriters, to select an insurer and determine which bonds, if any, shall be insured, and the Chief Financial Officer is hereby authorized to execute an agreement with the insurer relating to procedures for paying debt service on the insured bonds and notifying the insurer of any need to draw on the insurance and other matters.
Section 17. Official Statement. The Chief Financial Officer is authorized to approve circulation of a Preliminary Official Statement describing the Series 2008B Bonds and, after sale of the Series 2008B Bonds, to prepare, execute and deliver a final Official Statement.
Section 18. Continuing Disclosure. The Chief Financial Officer is hereby directed to execute and deliver, prior to delivery of the Series 2008B Bonds, a written continuing disclosure undertaking in order to enable the underwriters of the Series 2008B Bonds to comply with the requirements of Securities and Exchange Commission Rule 15c2-12. The continuing disclosure undertaking shall be in substantially the form which she shall, in consultation with Bond Counsel, determine to be appropriate.
Section 19. Utility Services Agreement. The Chief Financial Officer is hereby authorized, in consultation with the General Manager of the Board, to negotiate any changes, amendments, or modifications to the Utility Services Agreement to provide that the payments received will be sufficient to pay debt service on the Series 1999B Bonds and the Series 2008B Bonds. The General Manager and the Corporate Secretary of the Board are hereby authorized to execute and deliver the amendment or supplement to the Utility Services Agreement.
Section 20. Other Actions. In the event that the Chief Financial Officer is not available at the time that it becomes necessary to take actions directed or authorized under this resolution, then either the Manager of Finance and Planning or another person designated by the Chief Financial Officer or the General Manager of the Board or a person designated by him is authorized to take the actions delegated to the Chief Financial Officer by this Resolution. The officers, administrators, agents and attorneys of the Board are authorized and directed to take all other actions necessary and convenient to facilitate issuance and sale of the Series 2008B Bonds and the refunding of Series 1999B Bonds and the call of the refunded bonds prior to maturity, and to execute and deliver all other agreements, documents and certificates and to take all other actions necessary or convenient in accordance with this Resolution, and to pay costs of issuance including but not limited to transfer agent fees, financial advisor fees, bond counsel fees, rating agency fees, verification agent fees, auditor fees, bond insurance premiums, costs of printing the Series 2008B Bonds and the preliminary and final official statements, and any other costs necessary to accomplish the refunding of Series 1999B Bonds and the call of the refunded bonds prior to maturity and the sale and delivery of the Series 2008B Bonds.
Section 21. Applicability of the Outstanding Bond Resolutions. Except to the extent amended, supplemented or otherwise provided in this Resolution, all of the provisions and covenants provided in Bond Resolution shall apply to the Series 2008B Bonds issued pursuant to provisions of this Resolution, such provisions of said Resolution being made applicable to the Series 2008B Bonds herein authorized.
Section 22. Conflicting Resolutions. All resolutions and parts of resolutions insofar as they conflict with the provisions of this resolution are hereby rescinded.
Section 23. Severability and Paragraph Headings. If any section, paragraph, clause or provision of this Resolution shall be held invalid, the invalidity of such section, paragraph, clause or provision shall not affect any of the other provisions of this Resolution. The paragraph headings in this Resolution are furnished for convenience of reference only and shall not be considered to be part of this Resolution.
Section 24. Publication and Recordation. In accordance with the provisions of Section 6 of Act 94, this Resolution shall be published once in full in either the Lansing State Journal or The City Pulse, each of which is a newspaper of general circulation in the City qualified under State law to publish legal notices, promptly after its adoption, and this Resolution shall be recorded in the minutes of the Board and such recording authenticated by the signatures of the Chairperson and Corporate Secretary of the Board.
Section 25. Effective Date. This Resolution is hereby determined to be immediately necessary for the preservation of the public peace, property, health and safety of the City. In accordance with the provisions of Section 6 of Act 94, this Resolution shall become effective immediately upon its adoption.
We hereby certify that the foregoing is a true and complete copy of a resolution duly adopted by the Lansing Board of Water and Light of the City of Lansing, State of Michigan, at a ____________ meeting held on ____day, __________, 2008, at __:___ __.m., prevailing Eastern Time, and that said meeting was conducted and public notice of said meeting was given pursuant to and in full compliance with the Open Meetings Act, being Act 267, Public Acts of Michigan, 1976, and that the minutes of said meeting were kept and will be or have been made available as required by said Act 267.
If the above meeting was a Special meeting, I further certify that notice of said Special meeting was given to each member of the Board in accordance with the rules of procedure of the Board.
We further certify that the following Commissioners were present at said meeting: ___________________________________________________________________________________________________________________________ and that the following Commissioners were absent ____________________________________________________.
We further certify that Commissioner __________________ moved adoption of said Resolution, and that said motion was supported by Commissioner __________________.
We further certify that the following Commissioners voted for adoption of said Resolution: ____________________________________________________________________ _______________________________________________________________________ and that the following Commissioners voted against adoption of said Resolution: ___________________ __________________________.
I further certify that said Resolution has been recorded in the Resolution Book and that such recording has been authenticated by the signature of the Chairperson and Corporate Secretary of the Board.
__________________________________ __________________________________
Chairperson Corporate Secretary
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Motion by Commissioner Kramer, seconded by Commissioner DeLuca to approve the resolution for the Sale of Refunding 1999B Bonds.
Discussion: In response to Commissioner Cochran’s inquiry, Susan Devon noted that the maturity date of the bonds was not extended.
Action: Carried unanimously.
|
D. |
Return on Assets |
Whereas, the Board of Commissioners requested that the Staff conduct research and prepare a recommendation for the Board’s consideration regarding the setting of an appropriate rate of return target for the Lansing Board of Water and Light; and
Whereas, the Staff completed its research and presented its study to the Finance Committee meeting on August 4, 2008; and
Whereas, the Staff recommends that a modified Utility Financial Solutions (USF) approach be adopted by the Board as a standard to calculate the Overall Rate of Return; and
Whereas, in recognition of the large coal inventory carried by the BWL, the Staff recommends the overall rate of return be applied to net fixed assets plus materials and supplies; and
Whereas, the Staff recommends the overall rate of return should be subject to review each year as part of the budgeting process; and
Whereas, the Staff recommends that the Board directive for return on fixed assets should be changed to accommodate the UFS approach and should include the flexibility to adjust the calculated return upward for large construction projects and other unusual circumstances as needed and as approved by the Board.
RESOLVED, that the Board of Commissioners adopt the modified UFS approach for determining an appropriate rate of return target for the Lansing Board of Water and Light, the return should be subject to review each year as part of the budgeting process, and should be flexible to allow for upward adjustment to accommodate large construction projects and other unusual circumstances as needed and as approved by the Board; and
FURTHER RESOLVED, that the Overall Rate of Return target for Fiscal Year 2009 will be 6.18% including a Return on Equity of 6.31%:
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Discussion: Commissioner James was pleased to see the Return on Assets Policy before the Board of Commissioners and had questions regarding the return on equity table and whether or not other Michigan utilities were using the Wisconsin method.
Chief Financial Officer Susan Devon explained the return on equity table. She further noted that staff recommended using the Utility Financial Solutions (UFS) method, as modified to include materials and supplies, which is appropriate due to the large coal inventory. Most other utilities do not carry large coal inventories similar to that of the BWL. The BWL would also have opportunity to adjust the approach in the future to calculate a different rate of return should a large construction project take place.
Commissioner James also inquired as to why staff was not recommending the Wisconsin method as it yields a higher rate of return.
Ms. Devon advised that they recommended the USF method but any of the approaches would work.
Commissioner James thanked Ms. Devon for the information and noted that she may contact her in the future.
Action: Carried unanimously.
None.
Fiscal Budget 2008. General Manager J. Peter Lark advised that the BWL originally forecast for a loss of $6 million and recently expected a net income of $12 million. Although, the books have not closed for fiscal year 2008, the BWL expects a net income of $13.5 million. It was noted that net income was used to help fund previously budgeted capital expenditures and debt principle repayment. In addition, while last years budget called for a significant reduction in reserves no such reduction is required for fiscal year 2008.
Rate Comparisons. The BWL’s electric rates are approximately 20% lower than Consumers Energy. The electric rate difference for the average residential customer using approximately 750 kWh’s per month is 24%.
New Generation Taskforce. The New Generation Taskforce is scheduled to meet on Thursday, August 14th at 9:00 a.m. on the West Campus of Lansing Community College. All Commissioners were invited to attend.
Commissioner Kramer expressed appreciation and congratulated the General Manager and staff on turning the projections around and achieving financial success as a result of their hard work. Commissioner Lain echoed the sentiment.
Commissioner Thomas congratulated and expressed confidence in staff. He further acknowledged the need for Commissioner communication, but discouraged the micromanagement of staff responsibilities.
Commissioner Cochran agreed with Commissioner Thomas in principle. His desire to be informed is with the purpose of deflecting issues and educating those individuals who contact Commissioners. Commissioner Cochran further applauded staff for the financial turnaround and setting a new rate of return, which will benefit budget reviews and rate setting deliberations.
Commissioner James reported that BWL employee, Jimmy Lee Townsend passed away last Sunday and his service is scheduled for Wednesday, August 13th. As such, she asked the Secretary to send a floral arrangement on the Board’s behalf. In addition, Commissioner Lain asked that the Board be informed of such matters in the future.
None.
There were no public comments.
None.
ADJOURNMENT
On motion by Commissioner Kramer, seconded by Commissioner Zerkle, the meeting adjourned at 6:12 p.m.
/s/ Rhonda Jones, Corporate Secretary
Filed with Lansing City Clerk
August 22, 2008